Tip. The seven internal control procedures are separation of duties, access controls, physical audits, standardized documentation, trial balances, periodic reconciliations, and approval authority.
The seven broad principles are: Establish responsibilities; Maintain adequate records; Insure assets and bond key employees; Separate recordkeeping from custody of assets; Divide responsibilities for related transactions; Apply technology controls; Perform regular and independent reviews.
Examples of these activities include reconciliations, authorizations, approval processes, performance reviews, and verification processes. An integral part of the control activity component is segregation of duties.
Control activities – Control activities are the policies and procedures that help ensure management directives are carried out. They include a range of activities as diverse as approvals, authorizations, verifications, reconciliations, reviews of operating performance, security of assets and segregation of duties.
The six principles of control activities are: 1) Establishment of responsibility, 2) Segregation of duties, 3) Documentation procedures, 4) Physical controls, 5) Independent internal verification, 6) Human resource controls.
General controls include software controls, physical hardware controls, computer oper- ations controls, data security controls, controls over the systems implementation process, and administrative controls.
The four types of control systems are belief systems, boundary systems, diagnostic systems, and interactive system.
Three basic types of control systems are available to executives: (1) output control, (2) behavioral control, and (3) clan control. Different organizations emphasize different types of control, but most organizations use a mix of all three types.
There are five interrelated components of an internal control framework: control environment, risk assessment, control activities, information and communication, and monitoring.
Establishing Performance Standards. Measuring the Actual Performance. Comparing Actual Performance to the Standards. Taking Corrective Action.
Examples of control systems in your day-to-day life include an air conditioner, a refrigerator, an air conditioner, a bathroom toilet tank, an automatic iron, and many processes within a car – such as cruise control.
It is made up of three main components: a sensor, a controller, and an actuator. The sensor detects a physical quantity such as temperature, pressure, or position and converts it into an electrical signal. The controller processes this signal and generates an output signal that is used to control the actuator.
The basic control process, wherever it is found and whatever it is found and whatever it controls, involves three steps: (1) establishing standards. (2) measuring performance against these standards. and (3) correcting deviations from standards and plans.
The control function can be viewed as a five-step process: (1) establish standards, (2) measure performance, (3) compare actual performance with standards and identify any deviations, (4) determine the reason for deviations, and (5) take corrective action if needed.
Recognizing that organizational controls can be categorized in many ways, it is helpful at this point to distinguish between two sets of controls: (1) strategic controls and (2) management controls, sometimes called operating controls (Harrison & St. John, 2002).
Controls over information processing - A variety of control activities are used in information processing. Examples include edit checks of data entered, accounting for transactions in numerical sequences, comparing file totals with control accounts, and controlling access to data, files and programs.